The crude-oil-driven Permian has been a hotbed of midstream development in recent years and that’s unlikely to change anytime soon. RBN estimates Permian gross gas production surpassed 22 Bcf/d last month and projects that, if unconstrained by infrastructure, it would grow by another 4 Bcf/d or so over the next couple of years. One determinant of that rate of growth is adequate capacity to process gross gas volumes. In today’s RBN blog, we conclude this series with an assessment of the timing of processing capacity additions in the basin vs. RBN’s Mid-case gross gas production forecast.
Before we get to today’s topic, first an invitation: join us in Houston on Wednesday, November 9, 2022, for our next Spotlight Happy Hour, which will include a Q&A discussion on our recent Spotlight report and webinar on Targa Resources, one of the Permian’s major midstream developers. To RSVP, click here.
We’d also be remiss if we didn’t mention the latest source of turmoil in the Permian gas market: pipeline maintenance that sent spot gas prices at Waha Hub, the region’s benchmark trading point, to negative territory last week for the first time in two years — an indication of just how vulnerable and sensitive the basin is to midstream constraints. We discussed the market event in depth in this week’s NATGAS Permian report, but to briefly summarize, two major takeaway pipelines — Kinder Morgan’s Gulf Coast Express (GCX) Pipeline and Kinder’s El Paso Natural Gas (EPNG) system — conducted maintenance last week, and the partially overlapping events took as much as 1.3 Bcf/d of takeaway capacity offline at one point. With power demand and exports to Mexico in a seasonal slump, the capacity cuts hit Waha hard — absolute prices settled below zero for the flow days October 26-27. Intraday prices traded just below negative $2/MMBtu at times and averaged as low as minus $1.165/MMBtu for gas day October 27. The price disruption had various knock-on effects, including encouraging more ethane recovery and raising concerns of increased gas flaring.
The maintenance events wrapped up by October 28, and cash for the weekend package rebounded to more than $3/MMBtu, according to the Natural Gas Intelligence (NGI) Daily Gas Price Index. However, the outages provided a good preview of just how little spare pipeline capacity is available on the intrastate pipelines leaving the basin and underscored the likelihood of additional negative price events occurring before more pipeline capacity comes online next fall, particularly if multiple maintenance and market events converge as they did last week.
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